Japan’s Nikkei Ends Flattish on Caution over Market Overheating (Update 1)

Reuters

12:28 JST, January 18, 2024 (updated at 16:15 JST)

TOKYO (Reuters) – Japan’s Nikkei share average gave up early gains to end almost flat on Thursday, as investors turned cautious about the recent sharp gains of the index.

The Nikkei inched down 0.03% to close at 35,466.17, after rising as much as 0.7% earlier in the session.

The broader Topix edged 0.17% lower at 2,492.09.

“Market players became cautious about the recent sharp gains of the index,” said Shuutarou Yasuda, a market analyst at Tokai Tokyo Research Institute.

The Nikkei has risen 8% since the beginning of this year, hitting its highest level since February 1990 during the previous session.

“The Nikkei’s momentum was supported by a weak yen. But investors were also cautious that the yen’s decline would not last long, which prompted them to sell stocks,” said Yasuda.

Robot maker Fanuc, which has presence in China, fell 2.63% to weigh on the Nikkei the most.

Declines in Fanuc were a reflection of investor concern about China’s outlook, said Yasuda.

SoftBank Group fell 0.74% and video game maker Nexon slid 5.53%.

However, with the yen still remaining weak against the dollar, Toyota Motor rose 2.63% to become the biggest support for the Topix.

The index for automakers rose 1.97% to become the top performer among the 33 industry sub-indexes on the Tokyo Stock Exchange.

Tire makers rose 1.64%, with Bridgestone and Toyo Tire gaining 1.68% and 4.56%, respectively.

The dollar hovered near a one-month peak versus major peers on Thursday after robust U.S. retail sales data added to building expectations the Federal Reserve will not rush to lower interest rates.

A softer yen helps exporters as it raises the value of overseas profits in yen terms when firms repatriate them to Japan.